The Biggest Business Disaster Of 2012 Has To Be HTC

Business Insider

Thanks to the incredible sales of its Galaxy SIII and other Android phones, Samsung became a juggernaut in 2012.

It now dominates smartphone market share worldwide, and its being rewarded with massive revenues and profit.

Over the past 12 months, Samsung revenues were $173 billion.

The operating income from its mobile business alone is more than $4.5 billion per quarter.

Soon, Samsung's mobile operating income well be twice as much as Google's overall operating income.

What's truly incredible about this rise is that as recently as a year ago, Samsung wasn't even the leading seller of Android phones.

Back in 2011, that was HTC.

And that's why, even in the year of the Facebook IPO, Zynga's collapse, and Hewlett-Packard's $8 billion write down, you have to say that the biggest business failure of 2012 was HTC's.

In the past year, HTC smartphone sales shrank by 36%.

HTC's October 2012 revenues declined 19% over September 2012, and 61% from October 2011.

The weirdest thing about HTC's decline, especially in relation to Samsung's rise, is that, according to our phone reviewer Steve Kovach, HTC's top-of-the-line phone, the One X, is basically as wonderful as Samsung's flagship, the Galaxy SIII.

So what happened that HTC, leading in market share in 2011, producing phones on par with Samsung's in 2012, could have collapsed so drastically? 

What went wrong?

It seems HTC made two mistakes:

  • It didn't spend enough on marketing. In September, Jason Mackenzie, president of global sales and marketing at HTC, told us the reason Samsung was kicking his butt was the size of his budget. He told Business Insider's Jay Yarow: "Samsung spent four to six times more in advertising than us." This rings true. You remember all Samsung's ads making fun of iPhone users waiting in line. Anyway, HTC's slogan is "quietly brilliant." Clearly, it shouldn't be so quiet about it.
  • HTC got pushed around by carriers. Samsung sells the Galaxy SIII on all four major carriers and some smaller ones too. HTC's top phone, the One X, is only available on AT&T. Carriers want "exclusive" phones, and HTC caved to them on this demand.  T-Mobile sells a version of the One X, called the One S, but it's not as good.  Sprint has a version called the One V, but it's even worse than the One S. Verizon passed on the HTC One series altogether.

HTC could have afforded to spend more on marketing. In 2011, HTC had an impressive profit margin of 13%+.  And the decision to have an exclusive with one carrier on a phone without the brand recognition of the iPhone was probably also a mistake.



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